Thursday, June 17, 2010

U.S. Stocks Halt Global Rally

U.S. Stocks Halt Global Rally, Treasuries, Gold Gain on Economy

By Michael P. Regan and Nikolaj Gammeltoft

June 17 (Bloomberg) -- U.S. stocks halted a global advance, while Treasuries and gold rallied, as an unexpected increase in jobless claims and lower-than-estimated growth in Philadelphia manufacturing cast doubt on the strength of the economy.

The Standard & Poor’s 500 Index slipped 0.3 percent to 1,111.45 at 11:47 a.m. in New York and the MSCI World Index erased an earlier gain that would have extended its rally to eight days, the longest in 11 months. Copper and zinc tumbled more than 2.5 percent in London to lead losses in industrial metals. Ten-year Treasury yields fell 6 basis points to 3.2 percent and spot gold jumped 1.2 percent to $1,244.82 an ounce.

Stocks turned lower as the Federal Reserve Bank of Philadelphia’s general economic index dropped to a 10-month low of 8, less than half the median estimate in a Bloomberg survey of economists. Initial U.S. jobless claims rose to 472,000 last week, indicating firings remain elevated even as the economy recovers. European shares reversed early gains triggered when a Spanish bond sale eased concern about the region’s debt crisis.

“The economic numbers are still somewhat concerning,” said Brett Hryb, part of a group that manages $2.6 billion at MFC Global Investment Management in Toronto. “We have a very long-tailed recovery as opposed to a V-shaped bounce back. The gain in Treasuries and gold fall into the flight to safety. Gold is the net beneficiary every time the market is unsure of itself.”

The S&P 500 added to losses from yesterday’s 0.1 percent drop. The Philadelphia Fed figures stand in contrast to a report this week showing New York factories expanded at a faster rate.

U.S. Stocks

Consumer-discretionary, telephone and commodity companies led declines in all 10 industry groups in the S&P 500. Home Depot Inc., Verizon Communications Inc. and Alcoa Inc. fell more than 1 percent to lead the Dow Jones Industrial Average down 0.4 percent to 10,372.05.

“Clearly the market doesn’t like the Philly Fed number,” said Mike Shea, a managing partner and trader at Direct Access Partners LLC in New York. “If the numbers tell us anything it’s that this recovery is going to take longer than we thought.”

U.S. stock futures pared an early rally in pre-market trading after initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. The number of people receiving unemployment insurance rose, while those getting extended benefits dropped.

Europe Stocks

The Stoxx Europe 600 Index fell 0.2 percent, erasing a 0.7 percent rally. The earlier gain came after Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds at yields lower than the prevailing market rates, attracting bids worth as much as 2.45 times the securities on offer, assuaging concern that it would face difficulty meeting bond repayments.

Spain’s gauge of 35 stocks increased 0.6 percent, paring a rally of as much as 1.6 percent.

Spanish bonds rose, with the yield on the 10-year note falling from the highest level in almost two years. The yield dropped 12 basis points to 4.76 percent. The difference in yield, or spread, between German and Spanish 10-year government bonds narrowed 11 basis points to 210 basis points.

Spain is trying to convince investors it can cut the euro- region’s third-largest deficit, while propping up the country’s savings banks and lifting the economy out of a two-year slump. Spain, which faces 24.7 billion euros of maturing debt in July, had seen the risk premium on its 10-year bonds rise to a decade high on concern it may need to tap a European Union financial lifeline.

BP Rebounds

BP Plc, battling to contain the worst oil spill in U.S. history, rallied 6.8 percent in London as the company scrapped dividends and pledged asset sales to meet President Barack Obama’s demand for a $20 billion fund to help victims. The shares are down 48 percent since the rig explosion that triggered the spill in April.

The euro rose 0.5 percent to $1.2367 and topped $1.24 for the first time in almost three weeks as Spain’s bond sale bolstered confidence in the currency. The dollar weakened against 13 of 16 major currencies, led by a 1.6 percent drop versus the Swiss franc.

The Swiss franc approached an all-time high against the euro after the central bank softened its stance on fighting franc gains as deflation risks ease. The Swiss National Bank, which has been buying foreign currencies since March 2009 to counter the threat of deflation, said today that those risks have “largely disappeared.”

Emerging Markets

The MSCI Emerging Markets Index rose 0.4 percent, climbing for an eighth day in the longest stretch of gains in two months. Benchmark indexes in Turkey, Indonesia, Egypt and Romania climbed at least 0.9 percent.

Crude oil fell for the first time this week, slipping 0.8 percent to $77.02 a barrel.

Copper futures for September delivery slid 9.5 cents, or 3.2 percent, to $2.9185 a pound on the Comex in New York. A close at that price would mark the biggest loss for a most- active contract since June 4.

The Reuters/Jefferies CRB Index of commodities pared losses to 0.1 percent. Commodities may be headed for their biggest weekly gain since October if the benchmark index closes above its moving average, sending prices to a six-week high, said Mark Schultz at Northstar Commodity Investments LLC.

A close by the gauge of 19 raw materials above today’s 50- day moving average may push it up another 1.6 percent, Schultz said. That would mark a 4.7 percent gain for the week and leave the gauge at the highest level since May 5. Before today, the index jumped 3.2 percent this week, led by coffee, energy products and wheat.

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